Corporate Bond Sales Boom, Led by Buffett's Berkshire

Sales of corporate bonds in the U.S. exceeded $10 billion Thursday for the first time since June 30 as investment-grade companies take advantage of a decline in borrowing costs to refinance debt and fund stock buybacks.

Warren Buffett’s Berkshire Hathaway Inc. and its finance unit sold a total $1.15 billion of notes, contributing to more than $11 billion of corporate debt that was sold Thursday, according to data compiled by Bloomberg. Union Pacific Corp. sold $700 million of bonds, boosted from a previously marketed $600 million, Bloomberg data show, with the proceeds to help fund share repurchases according to a regulatory filing.

Companies are seizing the opportunity to sell bonds as yields fall from a three-month high. Investors are fleeing towards safer assets such as Treasurys amid the crisis in Ukraine.

“There’s a calming of the market,” Jody Lurie, a corporate-credit analyst at Janney Montgomery Scott LLC in Philadelphia said in a telephone interview. “Companies would be better positioned now to come to market than a few days ago.”

Berkshire Hathaway Thursday sold $750 million of 2.1 percent securities due 2019 that yielded 50 basis points more than similar-maturity Treasurys, according to data compiled by Bloomberg. Its finance unit offered $400 million of floating-rate bonds, the data show. Both will be used to help refinance debt, according to company statements.

Investor Appetite

In one sign of improving investor demand this week, Synchrony Financial, the consumer-lending arm being spun off from General Electric Co., raised $3.6 billion of debt Wednesday, boosted from a previously marketed $3 billion.

“A lot of investment-grade companies could see it as a sign that investors still have an appetite for corporate bond issuance,” said Lurie. Synchrony’s $1.25 billion of 4.25 percent notes due 2024 rose 1.6 cents since the sale to 101.4 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Yields declined to 3.72 percent Wednesday from a three-month high of 3.75 percent on July 31, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Index.

The extra yield investors demand to own corporate bonds rather than government debentures rose to 179 basis points Wednesday, the highest level since March, the index data show.

The benchmark 10-year Treasury note declined 6 basis points, or 0.06 percentage point, to 2.41 percent at 4:59 p.m. in New York, according to Bloomberg Bond Trader data. That’s the lowest closing level since June 19, 2013, when it yielded 2.35 percent.

Sales of corporate bonds in the U.S. exceeded $10 billion Thursday for the first time since June 30 as investment-grade companies take advantage of a decline in borrowing costs to refinance debt and fund stock buybacks.